Wednesday, August 18, 2010

Checking In on Consumer Credit Defaults

The Federal Reserve Bank of New York released its quarterly report on household debt and credit on Tuesday. It showed that for the first time since early 2006, total household delinquency rates declined last quarter.
As of June 30, “only” 11.4 percent of outstanding household debt was in a stage of delinquency, compared with 11.9 percent on March 31 and 11.2 percent in June of last year.

Below are a few visual highlights from the report. First is a chart showing that total consumer debt has been declining for seven quarters. It’s not clear how much further this aggregate debt level will fall, since economists do not have a good sense of  how much household debt constitutes a “healthy” level of debt. After all, household debt had been growing steadily long before the housing bubble.



Federal Reserve Bank of New York
One thing that economists do agree on more generally is that high delinquency rates are  not desirable, no matter how much debt  households have. If families want to take on debt, they should  be able to pay it off.
Here’s a look, then,  at consumers’ total balances by delinquency status. The dark green portion, which shows debt that is not delinquent, ticked up last quarter.


Some of the shifting of debt out of delinquency status is the result of  consumers’ paying off existing debt, but some is surely due to the expunging of unpaid debts through processes like bankruptcy.
Here, broken down by the states with the most trouble, is a graph showing the percent of mortgage debt that is more than 90 days overdue. Nevada has recently pulled to the lead, ahead of Florida:



Federal Reserve Bank of New York
Complementing that last graph is this one, which shows the percentage of consumers with new foreclosures in states with the biggest housing problems:

*Based on the population with a credit report.

Federal Reserve Bank of New York
*Based on the population with a credit report.
As you can see, Nevada has been the unhappy leader in this measure for some time.


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